At what volume of demand would the manager be indifferent

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Reference no: EM1385436

A manager must decide between two location alternatives, Boston and Chicago. Boston would have annual fixed costs of $70,000, transportation costs of $6 per unit, and labor and material costs of $20 per unit. Chicago would have annual fixed costs of $90,000, transportation costs of $4 per unit, and labor and material costs of $17 per unit. Revenue will be $300 per unit.

a. How much demand is required to break even at each location?

b. Which alternative would yield the higher profit for an annual demand of 3,000 units?

c. At what volume of demand would the manager be indifferent between the two cities? Which city should be chosen if demand is higher than this volume?

Please show all work, step by step, and the formulas and values used.

Reference no: EM1385436

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